The Four Biggest Winners of the Coming Commodity Boom

Justin’s note: Today, I’m sharing part two of my interview with Casey Research’s newest editor, commodities expert David Forest. On Saturday, David told me why he thinks a new commodity bull market is underway.

Below, David shows why investors can’t afford to ignore this opportunity. He also reveals his proprietary system for identifying commodities with the most upside…and shares the four he’s most bullish on today…

Justin: David, last time we talked, you told me why you think the next commodity cycle is underway. Can you tell me why everyday investors should care about this?

David: Sure. Let me start by telling you the story of Ivanhoe Mines. This is a Canadian company founded by one of the most successful mining developers on earth, Robert Friedland.

Friedland has founded four major mines globally and put them all into production. He’s made billions of dollars of profit for his shareholders.

In early 2016, when I was working at a different publishing company, I recommended Ivanhoe to my readers. The stock was trading at around $0.60.

It went on to have one of the most spectacular runs that we’ve seen in the resource sector lately.

Then, it gets to a point where prices are so low that people go out of business. Supply constricts. This sets you up for a rebound.

This cycle has played out countless times over hundreds of years. It’s reliable and extremely profitable if you buy at the bottom and sell at or near the top.

Justin: And your system helps identify the best commodities to speculate on?

David: Exactly. It tells us what markets are close to the bottom, and which ones are near tops.

Now, prices can go up for reasons other than tight supply. But we're focusing on markets where that cyclical scenario is playing out and supply is dropping and setting up for a rebound. And that's been a reliable way to spot high-potential commodities through the ages.

Justin: So, you mentioned nickel as one commodity that’s on the verge of a supply crunch. What other commodities are “buys” according to your system?

If you look at how much it costs to get natural gas out of the ground, liquify it, put it on a boat, and get it to market, the total cost ranges from $9 to $10 per MMBTU (one million British thermal units). In some cases, it can be as high as $12.

But the market price for LNG is around $8. That’s not sustainable.

Prices have to rise, or supply will constrict. We’re starting to see that happen.

In places like China, LNG prices have moved up 50% in the last two weeks.

That proves our thesis: that the market is tighter than people expected.

But current prices are still at the very low end of the cost curve. So, it's very difficult for most producers to make money.

So, that market still has a lot of upside.

Justin: How much higher could LNG prices rise?

David: Well, LNG was trading north of $20 per MMBTU in Asia four or five years ago.

This summer, they got as low as $5. Then you compare the market price to production costs, and the takeaway is obvious.

Prices must rise or there isn’t going to be supply. So that's one.

Justin: What other commodities do you like right now?

David: Uranium is another.

The uranium cost curve bottoms out at around $10 or $15 per pound. That’s the cost for the lowest-cost uranium producers in the world.

But most producers pay more than $20. The higher end of the cost curve gets up to around $30 or $40.

And uranium prices right now are around $20. So, most uranium producers are not making money.

In fact, we've started to see those low prices translate into shutdowns of mines. Kazakhstan, for one, is going to shut down about 20% of its production due to low prices.

Kazakhstan is the world's leading uranium producer.

Cameco, the world's largest public uranium company, is closing one of its biggest mines, the McArthur River mine in Canada.

So, we’re now at the point in the cost curve where companies are shutting down unprofitable operations. This obviously constricts supply and sets us up for a rebound.

Low prices cure low prices.

Justin: So, you’re bullish on nickel, LNG, and uranium. Are there any other markets that our readers should keep an eye on?

David: Platinum is another market to watch.

It's not quite as depressed as the other ones we’ve discussed, but prices are at multiyear lows around $900 per ounce.

We're also quite bullish on platinum because supply in platinum is very skewed geographically. About 70% of the world's platinum comes from one country, South Africa.

And right now, South Africa is not a good place to build new mines or even operate existing ones. The government is trying to bring in legislation to impose higher taxes—higher thresholds where companies must surrender ownership to local groups. So, the environment for capital deployment is not favorable there.

So, that’s another market to watch.

Justin: Great stuff. Thanks, David.

David: No problem.

Justin’s note: David and Doug say the upcoming commodity boom is presenting a massive moneymaking opportunity for those who get in now. And they’ve just launched a brand-new advisory that reveals the top ways to cash in… including 12 specific picks set to soar in the months ahead. But you only have until midnight to sign up and take advantage.

Click here to see why this could be your best chance to make lifechanging profits from this rare opportunity.

Reader Mailbag

Are you planning on getting involved in the coming commodity boom? Are you invested in any nickel, LNG, uranium, or platinum companies? If so, let us know how it’s going right here.